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In Proactive Sports Management Ltd v Wayne Rooney [2010] EWHC 1807 (QB), the High Court of England and Wales has held that an Image Rights Representation Agreement made between Proactive Sports Management Ltd and Stoneygate 48 Ltd, the company to which Wayne Rooney had assigned his image rights, was unenforceable as it was in restraint of trade.

BACKGROUND

Proactive and Stoneygate entered into the Image Rights Representation Agreement in early 2003 when Wayne Rooney was 17 years of age. It was designed to replace certain terms of various previous agreements entered into by the parties and was in relation to the representation of Wayne Rooney "off-field" only. The Agreement was for a term of eight years and remuneration was by way of commission on Stoneygate's earnings at the rate of 20 per cent.

Mr Stretford, Wayne Rooney’s agent at that time, was also Chief Executive of Proactive and a director of Stoneygate. It was Mr Stretford who successfully negotiated a series of highly lucrative sponsorship agreements for the "Wayne Rooney" brand between Stoneygate and various other major businesses. Mr Stretford was dismissed from Proactive in November 2008. Before he left the company, Mr Stretford, as director of Stoneygate, had declined to authorise payment of certain invoices raised by Proactive for commission under the Agreement.

On 18 December 2009, Stoneygate purported to terminate the Agreement. This was taken by Proactive as a repudiatory breach, which it subsequently accepted on 24 December 2009. Proactive then issued proceedings against Stoneygate for unpaid commission it claimed was due under the Agreement before it was terminated and for commission due after termination, as well as damages. Stoneygate contended that the Agreement was unenforceable as it was in restraint of trade.

In response to Stoneygate's defences, Proactive claimed that, in the alternative, if the Agreement was held to be unenforceable, Proactive was entitled to restitution to recover remuneration for services it had provided to Stoneygate on a quantum meruit basis.

RESTRAINT OF TRADE

The Judge referred to the leading case on restraint of trade, Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269, in which their Lordships had said that, even where a contract was of a kind that had become a common and accepted form of commercial arrangement, the court still had to consider whether there was some "exorbitance or special feature" in the contract that might still bring it within the boundaries of the doctrine of a restraint of trade. In that same case it was suggested that the "special feature" might be an inequality of bargaining power.

Applying these principles, HHJ Hegarty said that, "In my judgment, there was a very substantial imbalance in bargaining power between the parties". Essentially, HHJ Hegarty found that the Agreement imposed "significant restrictions on WR's freedom to exploit his talents". He had assigned his image rights to Stoneygate on a "perpetual exclusive worldwide basis" and Proactive was, by virtue of the terms of the Agreement, Stoneygate's sole and exclusive representative. Further, given the fact that there was no way Wayne Rooney could get out of the Agreement during its term unless Proactive breached the terms or became insolvent, the Agreement was, the Judge said, too restrictive.

Therefore, HHJ Hegarty found that the Agreement did come within the doctrine of restraint of trade and required justification as to its reasonableness by Proactive.

Proactive submitted that Stoneygate was contractually estopped from contending that any restraints imposed by the Agreement were unreasonable by virtue of a clause in the Agreement, which said effectively that both parties had sought independent legal advice and confirmed that all the terms were reasonable.

The Judge, however, was not persuaded by this argument because "restraint of trade is a matter of public policy out of which the parties cannot contract".

As the Agreement had been found to be subject to the doctrine of restraint of trade, the burden was on Proactive to show that it was reasonable, having regard to the legitimate interests of the parties. HHJ Hegarty found that none of the six arguments raised by Proactive justified the duration of the exclusive rights and obligations in the Agreement. Proactive was not entitled to any remedies as the Agreement was unenforceable for restraint of trade.

RESTITUTION

Proactive referred the Judge to the statement of principle in Chitty on Contracts (30th edition 2008), which states

A person who renders services under a contract that is unenforceable will be entitled to a quantum meruit if the other party has failed to carry out his part, provided the restitutionary claim does not undermine the policy of the statute (or common law rule) rendering the contract unenforceable.

On this basis and on the basis of various authorities, HHJ Hegarty held that Proactive was entitled to a restitutionary remedy and that such remedy did not amount to an indirect enforcement of the contract. The remedy would not, therefore, contravene the public policy considerations which made the Agreement unenforceable.

As to quantification, however, HHJ Hegarty decided that it could not be assessed by his court as further submissions and argument were needed.

Compare jurisdictions:Arbitration

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